Convertibles trading quiet, but players rev up on Ford new deal

By Ronda Fears

Nashville, Tenn., Jan. 11 - Convertible traders said the secondary market was rather quiet and uneventful Friday, but market players were revved up about Ford Motor Co.'s plans to sell $3 billion of 30-year convertible trust preferreds. Details were sketchy, but the market expects to see the Ford deal price next week and pricing guidance is anticipated on Monday.

"There wasn't much direction in the market today. It was really slow, outside of the Ford news," said a convertible trader at a major investment bank in New York. "Next week, depending on whether there are any earnings surprises, it's supposed to be a lot more interesting."

Market watchers and players expect a heavy roster of new deals to develop next week, even without the Ford deal, although many new deals are still anticipated to have short marketing shows with several overnighters.

"There's the overnight Monday deal, which is getting to be a habit," said a convertible fund manager in New York. "But we were hearing, even before the Ford deal was announced, that the calendar was going to really fill up next week. There are lots of deals in the wings."

Traders said convertible players were sitting on the sidelines as stocks took a dive Friday with little comfort taken by comments from Federal Reserve Chairman Alan Greenspan. The Nasdaq dropped 24.78, or 1.21%, to 2022.46 and the Dow Jones Industrial Average fell 80.33, or 0.80%, to 9987.53.

"Tyco got hit pretty hard at the close," but otherwise there wasn't much excitement or huge price changes, said one analyst.

Tyco International Inc.was slammed on rumors of another acquisition by the conglomerate, this time with defense contractor Honeywell International Inc. as the target, but Tyco outright denied it has any interest in Honeywell. Traders said Tyco's common stock dropped sharply and the convertibles were marked lower, but there was no activity in the converts. Tyco shares closed down $4.67 to $50.25.

While several semiconductor names were lower, like Sanmina, software continued to rally. Rational Software Inc. gained ground after the company late Thursday posted third-quarter earnings in line with estimates and signaled it was beginning to see signs of a turnaround.

Telecom issues retreated along with their stocks as investors awaited the first big batch of industry earnings reports anticipated next week. Juniper Networks and Ciena, along with Corning, were the leads taking the group lower. But Nortel Networks was one of the few issues to post a gain, and Verizon was slightly higher.

Energy names saw some of the biggest movement, traders said, all to the south.

"Oil and gas has fallen out-of-favor once again. Oil and gas prices are down sharply and so earnings are going to be much lower," said a convertible trader at one of the major investment banks. Anadarko Petroleum and Apache Corp. had large declines, the trader said, hut Kerr-McGee, Transocean Sedco Forex and Pride Internationl, among others, also were much lower.

New issues were mixed, traders said. Radian Group and Williams Cos. Inc. were higher, but Teco Energy lost ground. Best Buy's 2.25% convertible due 2022 lost 1 point to 99.75 bid, 100 asked as the underlying shares dropped $1.07 to $72.70. Axcelis Technology Inc.'s 4.25% convertible due 2007, however, edged up 0.125 point to 101.125 with the underlying stock off 4c to $14.56.

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